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IGM Financial Inc. IGM-T is ramping up its technology spending by purchasing a minority stake in Nesto Inc., an online mortgage lender that has been steadily growing as Canadians look for automated services with lower rates when purchasing a home.

On Tuesday, Montreal-based Nesto announced it has secured $80-million in capital, led by investment giant IGM Financial, a subsidiary of Power Corp. of Canada POW-T.

The financing was also backed by Portage Ventures, the venture capital arm of Power’s Sagard Holdings alternative asset investment unit, Sagard-backed Diagram Ventures, National Bank of Canada’s venture capital arm – NAventures – and BMO Capital Partners. Also joining the funding round were Michael Paulus and Michael Rowell, co-founders of Assurance IQ Inc., a U.S. online insurance seller purchased by Prudential Financial Inc. in 2019.

IGM Financial’s investment is a sign that Power-backed entities continue to push funding into financial technology companies despite the plummeting valuations that have plagued Canada’s tech sector this year – a major change for an industry that was booming throughout the pandemic.

This is the third round of financing for four-year-old Nesto since 2020. In total, including Tuesday’s announcement, the online mortgage broker has raised $167.5-million. Power’s Sagard acquired a 20-per-cent stake in Nesto, following a financing round in 2021.

Nesto chief executive officer Malik Yacoubi declined to comment on the dollar amount IGM Financial contributed to the latest round but confirmed IGM Financial has obtained a minority stake.

IGM Financial CEO James O’Sullivan said in a statement that the investment is part of the company’s commitment to greater transparency in the industry and increasing Canadians’ access to home ownership.

The sharp downturn in the technology sector this year has led to tens of thousands of layoffs globally as companies quickly look to shed operating expenses. According to website, which tracks tech-sector layoffs globally, 964 companies have cut almost 150,000 jobs this year, as of Dec. 12.

Nesto, however, has seen its business boom over the past year. The company is on track to originate more than $1.5-billion in mortgages for 2022, Mr. Yacoubi said in an interview.

IG Wealth Management, a subsidiary of IGM Financial, will be the first financial institution to use the Nesto tool with its group of 3,300 financial advisers in early 2023. While IG Wealth already provides mortgage services to its clients, president and CEO Damon Murchison said the current process is more traditional, with longer wait times and paper-based applications.

“Canadians want things to be a lot easier – they want digital and seamless and easy to use,” Mr. Murchison said in an interview. “The mortgage business is one where, quite frankly, you have to invest. You have to be digital and Nesto is truly democratizing mortgage financing in this country.”

Advisers will be able to provide clients with an online mortgage brokerage service that automates much of the application and underwriting process, offering lower rates and quicker turnaround times for approvals. It also allows clients to upload mortgage documents using a mobile device.

“We really found that that the mortgage process has essentially been a black box for Canadians,” Mr. Yacoubi said. “After submitting a mortgage application, many Canadians are left not knowing what the next steps are, which documents or information they need to provide. We always try to make it as transparent as possible for Canadians – and really simplify the experience.”

As part of the deal, a number of IG Wealth mortgage planning specialists and underwriters will move over to the Nesto team and Mr. Murchison will join the Nesto board of directors. Sagard chairman Paul Desmarais III currently sits on the Nesto board.

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